Document Type

Article

Publication Date

2-27-2013

Abstract

This essay outlines the rough contours of a conceptually new regulatory scheme based on mandatory pre-market government licensing of derivatives and other complex financial instruments. Contrary to the current approach to regulating derivatives markets, the proposed product approval regime explicitly aims to control the amount and types of risk before it is introduced into the financial system. In that sense, it is a true gatekeeping mechanism, a potentially more effective form of ex ante – as opposed to ex post – regulation of systemic risk in financial markets.

Keywords

derivatives, financial regulation, regulatory reform, Dodd-Frank, product approval, financial innovation, complexity, speculation, systemic risk

Publication Title

Harvard Business Law Review

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